AS TO THE ADMISSIBILITY OF
nos. 37679/97 and 37682/97
by John and Margaret SLOUGH & A.J. and W. KING and 10 Others
against the United Kingdom
The European Court of Human Rights (Third Section), sitting on 26 September 2000 as a Chamber composed of
Mr J.-P. Costa, President,
Mr W. Fuhrmann,
Mr P. Kūris,
Mrs F. Tulkens,
Mr K. Jungwiert,
Sir Nicolas Bratza,
Mr K. Traja, judges,
and Mrs S. Dollé, Section Registrar,
Having regard to the above application introduced with the European Commission of Human Rights on 26 August 1997 and registered on 5 September 1997,
Having regard to Article 5 § 2 of Protocol No. 11 to the Convention, by which the competence to examine the applications was transferred to the Court,
Having regard to the observations submitted by the respondent Government and the observations in reply submitted by the applicants,
Having deliberated, decides as follows:
The facts of the case, as submitted by the parties, may be summarised as follows. The applicants are all businesses connected with the firearms industry. A list of applicants is annexed to the present decision. They are represented before the Court by Edwin Coe, Solicitors, London.
In the case of application no. 37679/97, the applicants, Margaret and John Slough, a married couple, have been trading in firearms in partnership since 1976. In 1989, the applicants designed and commenced the manufacture of the “Spitfire” pistol. In 1995 the applicants ceased retailing and concentrated on the manufacture of the Spitfire and customisation of handguns (the process of improving and adding specialist components, thereby enhancing functions and increasing their value) using a rifling machine which they had designed. The applicants rented two workshop units on leases due to expire on 1 May and 3 July 1998. Between June 1994 and June 1996, their gross profit increased from £1,856 to £380,591.
As a result of the 1997 Firearm Amendment legislation - the Firearms (Amendment) Act 1997 and the Firearms (Amendment) (No. 2) Act 1997 (“the 1997 Amendment Acts”, see below), the applicants’ business suffered a substantial drop in the value of its assets. The specialised nature of the plant and equipment will make disposal difficult. For example, the applicants own a specialist machining centre costing £275,000 specifically designed for the manufacture of handguns. In August 1997, the applicants had been able to realise only £6,885 on assets previously worth £91,161. The applicants also ran a pistol shooting club, and owned a shooting range which was suitable only for handgun shooting.
The applicants in application no. 37682/97 rely on application no. 37679/97 (John and Margaret Slough), and have made no submissions of fact in relation to their claims.
The consequences of the 1997 Amendment Acts are that the applicants are unable to derive handgun-related income from their businesses, and that the value of the goodwill and assets of those businesses have depreciated. The applicants have received no compensation for the reduction in value of their goodwill.
By the beginning of 1999, approximately £22 million had been paid to some 1,500 dealers under the compensation schemes, of a total of approximately £67 million which had been paid to individuals, dealers and others. The Government estimated the total costs which would be involved in paying compensation under the schemes to be approximately £120 million.
B. Domestic law and practice
The Firearms Act 1968 has been periodically amended since it was passed, and forms the basis of the current system of the control of firearms in the United Kingdom. Section 5 of the Act of 1968 prohibits the possession, purchase, acquisition, manufacture, sale or transfer of the firearms there specified. Section 1 of the Firearms (Amendment) Act 1997 (“the First Amendment Act”) added large-calibre handguns to the class of prohibited firearms in section 5 of the 1968 Act.
Section 5 of the Act of 1968, as amended by the First Amendment Act, provided:
“(1) A person commits an offence if, without the authority of the Defence Council, he has in his possession, or purchases or acquires, or manufactures, sells or transfers -
(aba) any firearm which has a barrel length of less than 30 centimetres in length or is less than 60 centimetres in length overall, other than an air weapon, a small-calibre pistol, a muzzle-loading gun or a firearm designed as signalling apparatus.”
The Firearms (Amendment) (No. 2) Act 1997 (“the Second Amendment Act”; together with the First Amendment Act, “the 1997 Amendment Acts”) extended the scope of the prohibition in section 5 to small-calibre pistols by declaring (in section 1) that the words “a small-calibre pistol” in section 5(1)(aba) of the 1968 Act as amended by the First Amendment Act should cease to have effect.
The First Amendment Act provides as follows, so far as material:
“15 Surrender of prohibited small firearms and munitions
(1) The Secretary of State may make such arrangements as he thinks fit to secure the orderly surrender at designated police stations of firearms or ammunition the possession of which will become or has become unlawful by virtue of section 1 or 9 above.
16 Payments in respect of prohibited small firearms and ammunition
(1) The Secretary of State shall, in accordance with a scheme made by him, make payments in respect of firearms and ammunition surrendered at designated police stations in accordance with the arrangements made by him under section 15 above.
(2) A scheme under subsection (1) above shall provide only for the making of payments to persons making claims for such payments in respect of firearms or ammunition -
(a) which they had, and were entitled to have in their possession on or immediately before 16th October 1996 by virtue of firearms certificates held by them or by virtue of their being registered firearms dealers; or
(b) which on or before that date they had contracted to acquire and were entitled to have in their possession after that date by virtue of such certificates held by them or by virtue of their being registered firearms dealers,
and their possession of which will become, or has become, unlawful by virtue of section 1(2) or 9 above.
17 Payments in respect of ancillary equipment
(1) The Secretary of State shall, in accordance with any scheme which may be made by him, make payments in respect of ancillary equipment of any description specified in the scheme.
(2) For the purposes of subsection (1) above, ‘ancillary equipment’ means equipment, other than prohibited ammunition, which-
(a) is designed or adapted for use in connection with firearms prohibited by virtue of section 1(2) above; and
(b) has no practicable use in connection with any firearm which is not a prohibited weapon.
(3) A scheme under subsection (1) above shall provide only for the making of payments to persons making claims for such payments in respect of ancillary equipment-
(a) which they had in their possession on 16th October 1996; or
(b) which they had in their possession after that date, having purchased it by virtue of a contract entered into before that date.
18 Parliamentary control of compensation schemes
(1) Before making a compensation scheme the Secretary of State shall lay a draft of it before Parliament.
(2) The Secretary of State shall not make the scheme unless the draft has been approved by resolution of each House.
(3) This section applies to any alteration to the scheme as it applies to a compensation scheme.
(4) In this section ‘compensation scheme’ means a scheme under section 16 ... above.”
The Firearms (Amendment) Act 1997 Compensation Scheme (“the First Scheme”) was laid in draft before Parliament and approved by resolution of both Houses of Parliament. It was made on 10 June 1997. The First Scheme provided compensation for the large-calibre handguns themselves, for prohibited expanding ammunition and for certain ancillary equipment. There were three options for claiming compensation: Option A, a flat rate payment for individual items, Option B, a payment for an individual item at the price in the list of values annexed to the First Scheme and Option C, a payment based on the market value of an individual item at or immediately before 16 October 1996 (the date of the announcement by the Government of their response to, and legislative intention following, the Cullen Report).
Under Option A, a payment of £150 could be claimed for each large-calibre handgun. Under Option B, a payment could be claimed which was based on average retail values on 16 October 1996, reduced by about 25% to reflect normal depreciation in value. Under Option C, dealers were entitled to claim the “full market value” of the large-calibre handguns and ancillary equipment which they held in stock. The full market value was to be calculated on the basis of the cost to the dealer of the item plus 25%.
By section 2 of the Second Amendment Act, the provisions of sections 16 to 18 of the First Amendment Act were applied to small-calibre pistols. The Firearms (Amendment) (No. 2) Act 1997 Compensation Scheme (“the Second Scheme”) was made in December 1997, after having been laid in draft before both Houses of Parliament and approved by resolution of each House. The Second Scheme applied in relation to small-calibre pistols held on or immediately before 14 May 1997. The date for the calculation of full market value for the purposes of Option C remained 16 October 1996. The Second Scheme made provision for compensation in respect of small-calibre pistols, on materially the same terms as provided for in the First Scheme in respect of large-calibre handguns.
The applicants complain that the 1997 Amendment Acts have deprived them of their possessions, without an offer of compensation for the loss of their businesses and that there has therefore been a violation of Article 1 of Protocol No. 1 to the Convention. They complain that there is no effective remedy available in the domestic courts to make a compensation claim, and invoke Article 13 of the Convention.
1. The applicants complain that the 1997 Amendment Acts have deprived them of part of their businesses without an offer of compensation for the loss of value of the businesses or of the assets and goodwill comprising part of those businesses, contrary to Article 1 of Protocol No. 1.
The relevant part of Article 1 of Protocol No. 1 provides:
“Every natural or legal person is entitled to the peaceful enjoyment of his possessions. No one shall be deprived of his possessions except in the public interest and subject to the conditions provided for by law and by the general principles of international law.
The preceding provisions shall not, however, in any way impair the right of a State to enforce such laws as it deems necessary to control the use of property in accordance with the general interest … .”
The Government submit that the 1997 Amendment Acts pursued a general interest of the first importance, viz. the control of firearms and the protection of the public from the misuse of firearms. They take the view that the 1997 Amendment Acts did not effect a deprivation of possessions, but that they amounted to a control of use within the meaning of the second paragraph of Article 1 of Protocol No. 1. They state that there is normally no inherent right to compensation in cases falling within the second paragraph of Article 1 of Protocol No. 1, and refer to the Commission’s decision no. 11763/85, Banér v Sweden (Dec. 9.3.89, D.R. 60, p. 128, at p. 142). They add that the Government were not acting as an economic operator in passing the 1997 Amendment Acts, but were acting in their capacity as the guardian of public safety. They state that there has been, and is likely in future to be, a wide range of situations in which the Government judge it necessary to pass legislation to protect the public interest and that compensation for all or any significant business losses such as those claimed by the applicants, including loss of potential future income, would amount to a major burden on public resources. They refer to the following extract from the speech of the then Shadow Home Secretary, Mr Jack Straw, during the debates preceding the First Amendment Act:
“I wish that, in a perfect world, we could compensate everybody and also protect public safety, but we do not live in a perfect world. We have to make choices. I think that the Government’s amendment properly reflects a balance...
The effect of the precedent would be such that, when next we felt that there was a need to improve public safety through legislation, whether in respect of furniture, the pharmaceutical industry, the transport industry or firearms control, Governments and the House [of Commons] would always be constrained and often prevented from making decisions in favour of public safety by the enormous cost involved. Yes, as the European Court of Human Rights said, there is a balance to be struck between individuals’ fundamental freedoms and the general interest of the community, but in my judgment and that of my honourable Friends the balance on this issue must be struck in favour of the general interests of the community as a whole.” (Debate on Firearms (Amendment) Bill, 18 February 1997)
The Government refer to the development of firearms controls in the United Kingdom from 1920 onwards, and rely upon the following extract from the speech of the then Home Secretary, Mr Michael Howard, during the debates preceding the First Amendment Act:
“All businesses operate within a framework of legislation. In the case of the gun industry, the framework is stricter and more specific than that in many other industries. It regulates what types of guns and ammunition can be bought and sold and who may buy and sell them. It is right that there should be a strong framework to control the market in a product which is, potentially, extremely dangerous. Moreover, that framework of regulation has existed since the 1920s and everyone who works within the firearms industry operates within it ...
... [M]ajor changes have been made in the regulatory environment that applies to this industry several times in recent history, and those changes have had a massive impact on the shooting industry and on those who use guns for leisure purposes. In 1920, firearms controls were introduced for the first time. In 1962, airguns and shotguns were made subject to restrictions for the first time. In 1988, semi-automatic and self-loading rifles were prohibited. In 1992, disguised firearms were prohibited.” (Debate on Firearms (Amendment) Bill, 18 February 1997)
The Government submit that, in these circumstances, the applicants had no legitimate expectation that their businesses would not be affected by legislation such as the 1997 Amendment Acts. They submit that the applicants may diversify and use their assets and personnel in other fields of business, and that there are still trading opportunities in non-prohibited firearms. The Government note that the applicants have produced little, or no, information to substantiate their claims of loss of business. In respect of those applicants who have provided no information to substantiate their claims of loss of business, the Government submit that there is no factual basis on which a finding of a violation of Article 1 of Protocol No. 1 could be found.
The applicants accept that the decision to prohibit handguns is capable in principle of amounting to a general interest within the meaning of the second paragraph of Article 1 of Protocol No. 1. They refer to the Sporrong and Lönnroth v. Sweden judgment of 23 September 1982 (Series A no. 52, p. 24, §§ 69 and 73) and submit that the Court must decide whether a fair balance has been struck between the demands of the general interest and the requirements of the protection of the applicants’ fundamental rights. They also submit that, in so deciding, the Court must consider whether an individual and excessive burden has been placed on the applicants. The applicants contend that the effect of the prohibition of handguns on the value of their businesses, or on the value of the assets and goodwill which form part of their businesses, amounts to an expropriation of private property, and that they should therefore be paid compensation. They contend that “goodwill” is the value of their businesses based upon the profits generated by those businesses, and distinguish this from future profits per se, which they do not claim. They point out that the effect of the 1997 Amendment Acts was to make unlawful activities that were previously lawful, and submit that the decision to prohibit handguns was wholly outside the range of risks inherent in their businesses and far exceeded any measure that any person engaged in such business could reasonably have foreseen.
The Court recalls that Article 1 of Protocol No. 1 guarantees, in substance, the right to property and comprises three distinct rules (see, for example, the Sporrong and Lönnroth v. Sweden judgment of 23 September 1982, Series A no. 52, p. 24, § 61). The first, which is expressed in the first sentence of the first paragraph and is of a general nature, lays down the principle of the peaceful enjoyment of property. The second rule, in the second sentence of the same paragraph, covers deprivation of possessions and subjects it to certain conditions. The third, contained in the second paragraph, recognises that the Contracting States are entitled, amongst other things, to control the use of property in accordance with the general interest.
However, the rules are not “distinct” in the sense of being unconnected: the second and third rules are concerned with particular instances of interference with the right to peaceful enjoyment of property. They must be construed in the light of the general principle laid down in the first rule (see, for example, the Air Canada v. the United Kingdom judgment of 5 May 1995, Series A no. 316-A, p. 15, §§ 29 and 30).
The Court will first consider the extent to which the applicants’ “possessions” were affected by the prohibition on handguns introduced by the 1997 Amendment Acts.
The Court recalls its case-law that goodwill may be an element in the valuation of a professional practice, but that future income itself is only a “possession” once it has been earned, or an enforceable claim to it exists (no. 37683/97, Ian Edgar [Liverpool] Ltd. v. the United Kingdom, Dec. 25.01.00, Section III, see also the Van Marle and Others v. the Netherlands judgment of 26 June 1986, Series A no. 101, p. 13, §§ 39-41). The Court considers that the same must apply in the case of a business engaged in commerce. In the present case, the applicants refer to the value of their businesses based upon the means of earning an income from those businesses as “goodwill”. The Court considers that the applicants are complaining in substance of a loss of future income in addition to the loss of goodwill and a diminution in value of their assets. It concludes that the element of the complaint which is based upon the diminution in value of the business assessed by reference to future income, and which amounts in effect to a claim for loss of future income, falls outside the scope of Article 1 of Protocol No. 1.
The Court notes that there has been no formal expropriation of any assets of the applicants, whether in favour of the Government or in favour of a third party. Whilst it is possible that in certain circumstances there may be a de facto expropriation of possessions even without any formal alienation, on the ground that property has become wholly unusable (see, for example, Papamichalopoulos and Others v. Greece judgment of 24 June 1993, Series A no. 260-B, p. 70, §§ 43-45), the present application does not disclose any such circumstances.
The interference with the applicants’ possessions in the present case is more akin to that in the case of Pinnacle Meat Processors Company and Others v. the United Kingdom (no. 33298/96, Dec. 21 October 1998), in which the applicants were engaged in the business of deboning cattle heads, and the loss of business resulted from restrictions imposed on the use of specified bovine material. The Commission assessed the loss of business suffered by the applicants as a control of use rather than as a deprivation of possessions. Similarly, in its Tre Traktörer v. Sweden judgment of 7 July 1989 (Series A no. 159, pp. 21-22, §§ 54-55), the Court assessed the loss of a restaurant business consequent upon withdrawal of a liquor licence as a control of use rather than as a deprivation of possessions. In the present case, the Court considers that to the extent that any loss of business suffered by the applicants results from the prohibition on handguns, this interference with the applicants’ possessions amounts to a “control of use” rather than a de facto “deprivation of possessions”.
As to that “control of use”, the Court recalls that the aim of Article 1 of Protocol No. 1 is to achieve a fair balance between the demands of the general interest of the community and the requirements of the individual’s fundamental rights, and that this concern to achieve a balance applies also to the second paragraph of Article 1 of the Protocol. There must therefore be a reasonable relationship of proportionality between the means employed and the aim pursued (see the above-mentioned Air Canada v. the United Kingdom judgment, p. 16, § 36). Expressed in other terms, the Court must assess whether, taken overall, the applicants can be said to have suffered an “individual and excessive burden” (see, for example, the James and Others v. the United Kingdom judgment of 21 February 1986, Series A no. 98, p. 34, § 50).
The overriding aim of the 1997 Amendment Acts, as expressed by the Government in their observations to the Court, was to seek to ensure public safety. They submit, further, that the judgment made by the Parliament of the United Kingdom was that both of the 1997 Amendment Acts were required for this purpose. The Court observes that the applicants accept that the prohibition on handguns enacted by the 1997 Amendment Acts is capable in principle of constituting a public interest within the meaning of the third sentence of Article 1 of Protocol No. 1. The Court concludes that the 1997 Amendment Acts were enacted in furtherance of an important public interest, which was that of improving public safety.
The applicants contend that they have been required to bear an individual and excessive burden as a result of the measures in question.
The Court notes that, insofar as the applicants owned and/or were dealers in handguns they would have been entitled to compensation under the scheme representing the stock of handguns held by them. No details have been provided by the applicants of the sums, if any, received by them by way of compensation under the statutory scheme. The Court further notes that there is no agreement between the parties as to the impact of the 1997 Amendment Acts on the applicants’ businesses, and that no information has been provided in respect of the applicants in application no. 37682/97. In particular, no details have been provided by those applicants of the nature of their interest in the premises, if any, which they occupied or as to the effect of the prohibition of handguns on the continued use of their premises for the manufacture or retailing of firearms and/or as a gun club, or as to any alternative commercial use. Moreover, the information which has been provided does not distinguish between goodwill, which could in principle fall within the scope of Article 1 of Protocol No. 1, and future income and profit, which could not.
Even assuming that the 1997 Amendment Acts have had an appreciable adverse impact on the goodwill of the applicants’ businesses, the Court observes in the first place that, as businesses connected with the firearms industry, the applicants have at all times had to operate within the framework of legislative control which has existed in the United Kingdom since 1920 and which, as emphasised in the Parliamentary debates, has become progressively more restrictive as the years have passed. In these circumstances, the Court shares the view of the Government that the applicants had no legitimate expectation that the use of particular types of firearm, including handguns, would continue to be lawful (cf the Fredin v. Sweden judgment of 18 February 1991, Series A no. 192, pp. 17-18, § 54).
The Court further observes that legislative measures introducing controls on the ownership or use of particular articles in the interests of public health or safety will inevitably have an adverse financial impact on many categories of business which are dependent to a greater or lesser extent on the continued use of the articles in question, the nature and extent of the impact varying from category to category and from business to business within each category. Because of their direct knowledge of their society and its needs and resources, the national authorities must enjoy a wide margin of appreciation in determining not only the necessity of the measure of control concerned but also the types of loss resulting from the measure for which compensation will be made; the legislature’s judgment in this connection will in principle be respected unless it is manifestly arbitrary or unreasonable (cf the Lithgow v. the United Kingdom judgment of 8 July 1986, Series A no. 102, p. 51, § 122, and the Chassagnou and Others v. France [GC] judgment of 29 April 1999, § 75).
In adopting the present measures, the legislature determined that the grant of compensation, representing the value of the firearms whose possession had been rendered unlawful, should in principle be confined to those who owned the firearms in question, whether as private individuals or as dealers, and should not extend to cover loss of goodwill or other losses sustained by business connected with the firearms industry which were to a greater or lesser extent affected by the prohibition on the possession of handguns.
The Court cannot find that in reaching this judgment the United Kingdom upset the fair balance between the demands of the general interest of the community and the requirements of the protection of the applicants’ property rights by imposing on the applicants an individual and excessive burden.
It follows that this part of the application is manifestly ill-founded within the meaning of Article 35 § 3 of the Convention.
2. The applicants further complain that there is no effective remedy available to them in the domestic courts to claim compensation and they therefore also allege a violation of Article 13 of the Convention, which guarantees an effective remedy for a Convention breach.
The Court concludes, having examined the claim under Article 1 of Protocol No. 1, that there is no arguable claim of a breach of a substantive right under the Convention. Accordingly, the Article 13 complaint is unsustainable (see the Boyle and Rice v. the United Kingdom judgment of 27 April 1988, Series A no. 131, p. 24, § 54).
It follows that this part of the application is also manifestly ill-founded within the meaning of Article 35 § 3 of the Convention.
For these reasons, the Court, unanimously,
DECLARES THE APPLICATION INADMISSIBLE.
S. Dollé J.-P. Costa Registrar President
LIST OF APPLICANTS
A. J. & W. King
Brian C. Foster Holsters
Ecosse Transport & Trading Ltd
Hayes Manufacturing Ltd
John Slough of London
Mountain & Sowden Ltd
PWL Company Ltd
Webley & Scott Ltd
37679/97 & 37682/97 - -
- - 37679/97 & 37682/97